Performance appraisals as a selection criterion in downsizing

Purpose - The primary purpose of this article is to examine two alternative approaches for the use of performance appraisals in selecting individuals out of the organization (i.e. to be laid off). A rank‐order approach and a banding approach are compared to provide insight regarding issues associated with each approach. Design/methodology/approach - Literature examining the status of downsizing as an organizational strategy, as well as some of the legal and practical considerations associated with the use of performance appraisals in downsizing decisions is reviewed as a precursor to an illustrated comparison of a rank‐order approach and banding approach to select individuals to be downsized. Actual performance appraisal scores for 106 individuals working in an organization were analyzed for the purposed of the comparative illustration. Findings - The illustrative comparison highlights specific issues associated with using two different approaches for selecting individuals for an organizational downsizing. Research limitations/implications - To provide a more comprehensive examination of rank‐order and banding approaches for selecting individuals for an organizational downsizing, larger samples from a variety of organizations in different industries would be insightful. Further, organizations considering either approach for the purpose of making downsizing decisions should more closely examine existing case law and legal precedents to insure compliance with appropriate laws. Practical implications - The article highlights the potential dilemmas faced by organizations using a banding or rank‐order approach in making downsizing decisions. Originality/value - The paper contributes to a growing body of literature emphasizing the importance of performance appraisals in organizations.